This pace of change is accelerating to where achieving mass market
acceptance and penetration, e.g., electricity, telecommunications, no longer
takes multiple decades; rather it can be ubiquitously realized in a little
over a decade, e.g., cell phones and internet). The ‘internet of everything’
has increased the awareness of the energy revolution and made alternative
offering information instantaneously available. Customers are no longer
content to solely look at their current provider as their source for energy
information and are unwilling to wait for access to energy offerings that
meet their preferences and expectations.

The power sector will need to come to grips with the reality that a
longstanding, monopoly-based customer relationship is not an indicator
of future customer retention. Nor can it be counted on that the traditional
service offering boundaries established by regulators will preserve
the ability of incumbents to maintain their natural market position
without erosion. Utilities will need to radically alter their approach to
participating in future markets and to interfacing with customers.

Energy Marketplace Transformation

The combination of technology and customer expectation evolution
has the potential to dramatically reshape the market landscape of
the future. Simple energy acquisition will not be a narrowly defined
customer action, but will likely be just one part of a broader home
services and personal energy management decision. This will be the
essence of customer choice in the future–the option to participate in
energy markets differently and in different energy and related markets.

As the notion of customer choice unfolds, elements of the current
customer base will seek to procure both energy, energy-related and
home products and services. These products and services can be
broad and directly and tangentially-related to power and essentially
create a self-contained ‘ecosystem’. This ecosystem can contain
elements related to energy management, home experience, security,
renewables, micro-generation, electric vehicles and telecom, and
themselves be comprised of multiple product and service categories
within broader categories. Figure 1 provides one view of this future
ecosystem.

As incumbent providers, utilities are well-positioned to leverage
this broad energy ecosystem to develop targeted customer product and
service offerings and unique value propositions. The challenge will be
to identify which offerings will be the most attractive to customers
and to commercialize them in a compelling manner.

To strengthen their positioning in the evolving energy ecosystem
depicted above, companies could learn from other sectors and
companies that have experienced similar disruption in the past, or
are disruptors today. For example, the telecom and cable television
industries have some commonality to the emerging customer
marketplace. Both sectors underwent upheavals precipitated by
policy, technology and competitive influences that led to shifts in
market structure, offering breadth and customer engagement. In
addition, new ‘platform’ industries are being created where open
linkage and sharing of assets, services and information create ‘
crowd-based’ market alternatives and new business models and methods for
creating margin sources and levels.

Technological evolution means that the challenge of developingcommercially compelling value propositions for a differentiated rangeof customers is now more complex. The traditional focus of deliveringvalue from a few simple–but largely indistinguishable–elements isbeing replaced by broader and more sophisticated value propositions.The challenge is to develop mass-market customer offerings thatsucceed in giving individual customers personalisation and individualchoice, while also delivering attractive margins where scale may notalways be available. In this environment, commercial attractivenessmay be characterized by product bundling, pricing and paymentoptions, channel accessibility and, customer empowerment, as wellas by product and service need fulfilment and performance.The need for successful commercialization is a table stake forincumbents to be effectively positioned in this future marketplace.However, utilities have had limited need to be commercial in theirhistory and do not maintain real competencies in this area. A solutionexists if utilities are open to developing broader relationships withexisting providers in the market. Given the lack of commercializationcapabilities within the utilities sector, leveraging relationships withestablished OEMs, marketers and distributors, research organizations,universities and, venture funds, may be a necessary market model toaccelerate capabilities access for the industry to pursue (Figure 2).

As illustrated close-by, the utility industry can function as a ‘partner
of partners’ to many of the types of entities described above. In this
capacity, it is leveraging existing partner know-how, market channels
and innovation engines that it does not possess. It is also reducing its risk
profile and time-to-market. Similarly, the utility industry is attractive
to many of these example entities as it represents a growing market
segment, possesses strong relationships with customers and maintains
attractive market access and customer knowledge today.

Regardless of the path chosen, the power sector will need to
aggressively think about how to best position itself for success. This
positioning will involve the adoption of multiple strategies where
incumbents focus on capitalizing on historical reputation strengths,
Partner of Partners- Expanding Market Relationships Figure 2